"Year-on-year inflation is falling and is now down to 1.7%. Monthly inflation rates are flat to falling across most of the euro area."

And what is bad about that on an aging continent our savings lose "only" 1.7% of their value each year? Are the old people not supposed to be consumers?

"The ECB is doing none of this."

It gets more ond more obvious what is going on. There was once the Mark, backed by hard work and production. And there was the debt slavery Dollar empire, backed by fraudulent banks, inflation and money printing. With the reunification it was possible to force the end of the Mark on Germany. Now Germany is trying to make the Euro a bit more Mark-like. Of course the money printing casino banksters cannot allow that. Not surprising that they support the Latin bloc.
Let me be clear here: Either the Euro will fail and then you have the Mark back, or a "Neuro" with Mark standards. Or we will turn the Euro into a new Mark. Because they have already lost the battle, I would kindly ask all banksters to move on to Russia, China, India and Brazil and to put them in their debt slavery.
We have enough of this, and we will change it all costs.

LoL - nope, it will be the LEURO. I share your analysis but not your predictions. You can talk the talk but can Europe walk the walk? Look to the key positions in this end game, do you see anybody who is not for the LEuero (Lira)? German tax payers bought in a bad, long-run deal taking up the debt tab beeing insulted in return - after a decade of wage stagnation,marginal dead end jobs, spiralling taxes falling behind in net income and net worth. And - who has 65% apprpval? Right - Mutti does.

LoL - nope, it will be the LEURO. I share your analysis but not your predictions. You can talk the talk but can Europe walk the walk? Look to the key positions in this end game, do you see anybody who is not for the LEuero (Lira)? German tax payers bought in a bad, long-run deal taking up the debt tab beeing insulted in return - after a decade of wage stagnation,marginal dead end jobs, spiralling taxes falling behind in net income and net worth. And - who has 65% apprpval? Right - Mutti does.

It will be the LEURO. I share your analysis but not your predictions. You can talk the talk but can Europe walk the walk? Look to the key positions in this end game, do you see anybody who is not for the Light Euro? German tax payers bought in a bad, long-run deal taking up the debt tab beeing insulted in return - after a decade of wage stagnation,marginal dead end jobs, spiralling taxes falling behind in net income and net worth. And - who has 65% approval? Right.

Lowering rates from .75% is not going to return the Eurozone to growth. Credit availibility is not the issue here, it is very simply lack of demand. Same thing in the US, same thing in Japan, but no one seems to comment on it.. central banks have done all they can do, it is time for serious fiscal action to create growth - jobs programs/lower taxes/ write down debts/ etc. Any one will work.

You've got what - 50%+ youth unemployment around the Eurozone? People digging through dumpsters for food in Greece? Yea, what these people need is a good loan with no means to pay it back. Lets just reflate the housing bubble and people can borrow more off fictitious wealth! Morons...

That's completely incorrect. Each bond purchased by a Central bank pushes an amount of money equal to the purchase price into the economy. Are you really saying that central banks have no ability to influence inflation?

It pushes an equal amount of reserves into the banking system, which banks do not need to make loans in the first place. Thus the completely useless, endless QE programs put forth by the Fed so far - although to some extent it seems to drives people into other asset classes, but nothing into the "real" economy.

Sure, central banks can control inflation somewhat by raising interest rates.. but as we see in Japan even with rock bottom rates for decades monetary policy can only take you so far.

CB's aren't doing asset purchases from Joe Shmoe with a $1000 T-Bill, these are enormous intrabank transactions between large financial institutions that have accounts at the Fed/ECB/etc. The CB purchases bonds (same as it does when it lowers rates) or MBS and the banks get an increase in their reserve balance at the CB. Unfortunately, no money is added to the real economy.
But these banks already have way too many reserves as it is, and they don't need reserves in the first place to make loans, they just need creditworthy borrowers. And there aren't a whole lot of those out there right now who actually want to take on more debt in a sluggish global economy..

Sometimes, arts imitates life, though figuratively... ECB acts like Aquilante - Brancaleone´s horse! Always the first to escape.
What a generation was that who ruled the world during the post war up to the 80´s...

The US has a common currency but New Yorks or Texas are very different from Puerto Rico or Mississippi but that does not mean that it doesnt work.

The problem for the euro-zone is that the rule-set which was set up to begin with was not enforced. If no one sticks to the rules, then how can it work? if all countries had a debt less than 60% and never ran a current account def of more than 3%, we would not be in this mess now.

Hopefully we have learned from our past mistakes and the rules will be enforced more strickly this time. With a banking Union we could avoid another crises.

Thank you but no thank you, I do not agree with the comparison between the US and Europe, nor do I see the US as a model in any sense, let alone economics.
No banking union, no more Latin tricks to have the Northeners pay for them.

give the tax money Portuguese companies pay in the Netherlands back to the Portugeuse - that would very likely solve the problem, at least partially.
Add to that the items (which belong to the Portugeuse Royal Family) and were stolen from one of your museums to the things we'd like to see back in our own land, in the right hands.
Thank you. Dank u vel. Obrigado

The USA has been a federation for 240 years with a very strong federal government with authority for defence, justice, treasury, transportation, healthcare, etc. The United States of America is united by a single language that all must learn to succeed and (though some might argue this) a policy of mono-culturalism where immigrants need to adapt to the American culture (much more than say, Canada's policy of multiculturalism where immigrants are incented to retain their home cultures in a tolerant society).
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Europe or the EU is 27 member states some of which have enjoyed sovereign autonomy and very different cultures for thousands of years. The plight of accelerating integration over the past 40 years is that at some point in time it runs smack into the face an absolute need to exercise nation state sovereign authority ... as in I need my money for myself, NO, I won't give you another bail out.
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There is absolutely no comparison, only contrasts between the USA and the EU.

It would ne nice if you took the trouble to read a little before posting your comments:
1.No company chooses to pay taxes in the Netherlands because we are blond. Portugese (and other companies) set up mail box companies in order to pay 1% tax (instead of..x in their own countries). This means Holland receives close to nothing.
2.Nothing keeps the Portugese, US, UK, etc. governments to tax these companies "at the source", that is in thier own countries of origin. The national governments simply choose not to. These are international agreements ment to prevent double taxation.
3.These international agreements lead to national governments loosing tax money at comparable levels. Ever heard of Google? Company from the Bahamas. Ever heard of ING? Bank from ...The Vrigin Islands.
Yet nor the US nor The Netherlands cries "their money have been stolen".
Grow up, get to work and pay your debts.

You have effectively made profit with this crisis, thus bailing yourselves out. The Netherlands is one of the most indebted nations on Earth, no matter how much you hide that fact or change the values on Wikipedia. If it wasn't for the revenue you attract (illegally ) from many countries which were forced to do so to avoid paying more tax, you are taking away the revenue which is so important for budgetary consolidation. Even if it weren't illegal (which it is). It is highly immoral.

But what to expect from a country of backstabbers whose only contribution tote world was stealing one half of the Portuguese Empire away from them when they were down ( cowardice) and THEN inventing apartheid.

"JASPER, Alabama (Reuters) - Thanks largely to the U.S. Federal Reserve, Jeffrey Nelson was able to put up a shotgun as down payment on a car.

Money was tight last year for the school-bus driver and neighborhood constable in Jasper, Alabama, a beaten-down town of 14,000 people. One car had already been repossessed. Medical bills were piling up.

And still, though Nelson's credit history was an unhappy one, local car dealer Maloy Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Wall Street-backed subprime lender Exeter Finance Corp so Nelson and his wife could buy a charcoal gray 2007 Suzuki Grand Vitara."

Large scale purchase of assets is not monetary policy - it is fiscal policy.
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In particular, it would be paying large amounts of cash precisely to those people who (1) don't want to spend and (2) don't want to invest, namely bondholders.
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Large scale asset purchases (QE) is fiscal policy, and generally ineffective towards increasing demand. The only instance in which it might boost demand is by allowing governments to run unsustainable deficits for longer - which doesn't help repair imbalances or fix structural problems.
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On monetary policy, if inflation does fall further (which seems less likely given recent depreciation), then the ECB should probably explore real monetary policy innovations, like reforms to support negative nominal interest rates. But asset purchases are not the role of a central bank. No central bank has a democratic mandate to run up seigniorage tax and hand out the proceeds to bond issuers & bondholders.
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The solutions most important for raising growth across the eurozone, are:
1) banking union. Can't be stressed enough. Single set of standards, single resolution mechanism & all that. It should go further and faster than current proposals. There should be a single European authority where a new bank can be registered, allowing it to trade freely (online or through branches or even through street vendors) in all eurozone countries. AML regulation should be reformed so that standard OAuth providers are good enough for all financial services (no requirement for in-person meetings; no need for permanent physical address; etc). Same credit conditions for private entities in all states; ease of moving new equity into banking for recapitalization without contraction of lending. Most urgent; greatest promise.
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2) All governments must have sustainable public finances, in order for banks (which hold massive quantities of government bonds) to function properly (essential for business investment & employment). So, governments really do have to cut deficits, even in a depression (the worst possible time for deficit cutting). That's a consequence of historically bad fiscal policy in the good years (it would be awesome if all countries looked fiscally like Finland).
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Yet, deficit cutting (unlike recent moves) must be designed to do least possible damage to demand. Retirement ages must be increased *immediately* to 70 (or so), such that nobody (except the disabled, etc) is able to retire in the next few years. Every year public finances would improve, and yet demand would only increase (as people work longer and spend more).
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Areas of public spending that make the least contribution to living standards (especially of the poorest) should be cut most (e.g. military spending should be slashed to an Irish 0.6% of GDP in all fiscally stressed countries). In all such movements, it is essential that government intervene to remove the burden on those worst affected (e.g. more effort is needed for retraining & employment creation, especially for young people, older people and mothers returning to the workforce after childbirth).
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3) Wider structural reforms hold enormous potential, even in the short to medium term.
- Tax efficiency really matters: eliminate corporation tax (allow businesses to invest, raise productivity & create employment; allow small businesses to compete fairly; stop handing millions to rent-sucking accountants); move to a single high rate of VAT (20-30%, no exemptions for energy, food, clothes or anything else, no distortions or subsidies); ensure that marginal effective tax rates never exceed 60% or so (even for the poorest workers facing benefit withdrawal), etc.

- investment in R&D really matters, and should be over 5% of public spending in all countries (whether material research, graphene solar, experimental fusion reactors, extension of OROCOS & open source robotics, algorithm development & mathematics, chemical engineering, etc). That's what's really creates the potential for long term economic growth (though it's sufficiently removed for most economists to overlook it).

- ease of doing business is essential, if scientific & engineering progress is to actually feed through into innovation, rising productivity, employment & living standards. Eliminate all barriers to entry. Make all services available online (and in English in all countries, to make it easy for even small businesses to trade & produce across borders). Make taxes easy. Make regulation simple, fast & responsive. Make admin a doddle. Remove barriers to employment (allow all businesses to easily sack their less productive workers, without cost or hassle, so that small businesses can actually hire people without fear of being wiped out by a bad employee).

Other major EU-level issues:
1) Energy.
EU states should already club together, and immediately pledge (and provide) €5-8 billion for additional high capacity gas pipelines to Turkey, and specifically: (1) to the Iranian border, (2) to North Cyprus (Central Asia is already covered).

We should then make some major overtures to Iran: if they end their nuclear ambitions (as South Africa before them), we'll immediately end sanctions, reopen financial services, allow free travel, buy billions of euro in oil, and within a couple of years open up major gas pipeline (Iran is sitting on over 12% of global proven gas reserves, and isn't doing anything with them; Europe badly needs cheap gas). Getting friendly with Iran is the right thing for humanity - Iran's people deserve better. For Europe, it also means cheap energy imports - which we badly need (greenwash: we can still tax it to keep domestic prices high if we want - that'd at least give us fiscal surpluses without hurting domestic demand).
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With a gas line under construction to Northern Cyprus, we should step up pressure on Cyprus (and other parties) to reach a settlement. There will be over €40 billion euro worth of natural gas to export through this pipeline (some of it belonging to Cyprus, a bit more belonging to Lebanon, and perhaps some of the Israeli gas from the same area). Royalties would pay off the majority of Cypriot government debt. But that's all conditional on reunification.
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Lock the richest 2% of people in both halfs of the island together (throw in the poorest 2% for some balance), until they reach a reunification settlement.
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Beyond that, there's urgent need for more cross border gas distribution & electricity networks and market integration. Realistically, that will have to be privately funded or part-funded by nation states (where the money is), but it would benefit from EU-level coordination.
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2) trade
The Canada-EU free trade deal needs to be passed ASAP - i.e. in the next few weeks. Get it finished already (doesn't have to be perfect - it's already decent).
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The transatlantic trade & investment partnership must go through fast (as billed). Push it relentlessly. Don't be too precious about particular (nice to have) consumer protections, when the arbitrage & employment potential is this big.
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Get free trade with Ukraine ratified & implemented (more pressure needed there).
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Set up monthly high level meetings with Russia - major (incremental, ongoing, relentless) push towards converging regulatory standards, legal reform, property rights reform, elimination of trade barriers, etc. Russia-EU is a massive economic area, with deep mutual dependence, and enormous future potential (Russia could be & should be as rich per-capita as Norway, if only the policy set up was better). Super-massive market, massive potential source of cheaper (green & nuclear as well as black) energy & resources, massive source of culture & common human interests.
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3) Migration
For the Schengen area (not including the UK), visas are a common matter. Unilaterally immediately open up immigration to citizens of developed countries: Canada, US, Japan, Taiwan, South Korea, Singapore, Australia, New Zealand, UAE & Israel - provide instant open ended work visas (online application) to all applicants from these states. Make Europe the best place in the world to build and run a multinational business, with easy access to world markets (ability to recruit skilled workers; and with ability to position products & communicate effectively in all major markets).
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I know there are established political lobbies against all the things I propose above. Still, I think there's a clear majority constituency across Europe in favor of growth and higher living standards. I genuinely can't understand why politicians aren't already doing or hyperactively pursuing all of the above.

RA seems to think that everyone in the world agrees with his economic theory. But not only do most not agree with “market monetarism” quite a few don’t agree with the activist monetary policies of the Fed and BOE. Claiming success for those policies is nothing but the post hoc fallacy.

Most economists know that business people pay little attention to interest rates; they focus on profitable opportunities. So most monetary pumping does little more than inflate asset prices. If businesses aren’t investing it’s because they don’t see profitable opportunities. In the Big EZ south that means nations need to do more deregulation and privatization. It also means that wages need to fall more.

If cheap money prevents governments from making the needed changes, then the ECB should raise interest rates.

The problem of high borrowing rates in EMU periphery has been known for a long time and the OMT protocol was devised to steer short-term rates down. The protocol was never activated, but it's been so successful that two-year government bond yields still manage to stay about 300 basis points off highs in both Spain and Italy amid murky party finances, a hung parliament and another sovereign/bank rescue.
The ECB was drawn into crisis-management abruptly and had to change its priority scale accordingly. There's little it can do to make the OMT-related decline in short-term feed through to actual bank lending rates, except maybe a further cut in the deposit rate bringing it sub-zero (a small but bold move, for its implications). The case for making recipients of ECB funds pay for parking them in idle accounts instead of lending to the real economy looks compelling and the case against it (made, once again, by the lone-dissenter but still influent Bundesbank representative) is barely convincing when the mere danger of entering a twilight zone is quoted.
At the very least Draghi is now correcting the emphasis on stabilization early this year, which made him sound prematurely optimistic on the euro economy. In the latest post-council press briefings he often remarked the debate on the need for more easing. That may anticipate something concrete, but it has to come soon.

The ECB obviously has not been doing its job as a central bank in the context of the ongoing currency war, an undeclared but nevertheless a shooting war, allowing other major central bankers to openly and purposefully print and deflate, while virtuously eschewing such ungentlemanly policies.

How telling that in its otherwise accurate and laudable indictment of the ECB's uselessness, this issue and the obvious way of addressing it are left out by The Economist.

The ECB does not make monetary policy - that is dictated to it in the Bank's organic legislation. Calls by RA and others to ignore the law are dangerous IMO.

The monetary policy in place in the EZ is right for Germany, that country having reshaped its economy so as to perform at a high level under such a policy. Others who wish to share Germany's currency will have to do likewise - monetary policy will not be allowed to be used as a substitute for structural reform - IMO Germany will leave the EZ before it will sit still for that.

In addition the idea that a high Euro will always work for Germany is magical thinking. Inflation is not a leading concern now.

I'm all against printing money for the sake of having more money. But allowing the Euro to be squeezed and forced up like a bar of soap by MANAGED competing currencies nicely illustrates the EU liberal non-policy of floating down river and belly up - not "laissez-faire" but "se laisser faire". Trusting the markets is one thing, trusting manipulated markets is daft.

EZ monetary policy is established in Maastricht and other statutes. The currency is "Germany's currency" because it uses it, because it has adapted its economy to function well under the 'hard money' regime created by the founding laws of the EZ, and because Germany is far and away the largest economic force in all of Europe - that's a pretty compelling list of reasons IMO.

All countries entering the EZ were aware of the established monetary policy created by law. Germany and others - all of them culturally Protestant - adapted to that policy. Others - none of whom are culturally Protestant - couldn't muster the strength of character to do so; they relied on a combination of lies, financial irresponsibility, and the unshakable belief that EZ laws, their own laws, were written in sand. That error haunts them now.

Your basic thesis, as I understand it, is correct though - such culturally and economically distinct groups of states have no business sharing a common currency. Nothing but distress can result from the attempt to do so.

The idea that areas with economic cultures and work ethics separated by a wide perceived divide cannot use a common currency is given the lie by the USA.

And once again I am not advising a monetary policy change (or reassessment) in a vacuum. There happens to be an ongoing currency war, which Europe did not start and is not fueling. That is no reason to stroll around the battlefield pretending stray bullets are hummingbirds.

The ECB link Shaun directed me to has an ECB boffin loftily declare that any policy change is likely to _ignite_ a currency war. Wake up, my man! or rather... Duck, you sucker!

The US is a single nation, not a collection of sovereign states each of whom jealously husbands its authority over all relevant practices within its own territory. You know this, D-II.

There may be a currency war starting, but until it has enough impact on Germany to deeply dent its giant CA surplus - nothin' gonna happen. When that time arrives, if it ever does, then the EZ may have to do what the Swiss have done so well. Not there yet - not clear we ever will be.

"The US is a single nation, not a collection of sovereign states each of whom jealously husbands its authority "

Exactly. What bugs the euro is not any perceived difference in ethics or working hours or religious affiliation, it is the individual states' desperate hold on antiquated notions of sovereignty - as if any single European state, Germany included, could withstand a serious monetary storm.

Sovereignty has to be dusted off and made effective, and that means a scale-up to regional level for many of its facets.

Franklin's admonition about hanging together or separately is still very much true - for Europe.